tv Squawk on the Street CNBC December 10, 2009 9:00am-11:00am EST
same old stuff just paid differently. >> thank you so much for coming in. been great having you here. that does it for us today. be sure to join us tomorrow. "squawk on the street" is next. live and cooking from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. >> i'm melissa lee in today for erin burnett who is on assignment. check out the futures. we are looking at a higher open, the dow-jones futures about 47 points above fair value. the nasdaq about 8 points above fair value. looking like a good day so far. u.s. trade deficit narrowing unexpectedly falling as a rise in exports was slightly higher than the increase in imports for the month of october. meantime weekly jobless claims rising slightly more than expected, pushed up by layoffs in seasonal industries after falling for five straight weeks. we've got some dollar weakness on the back of that report.
>> but a citigroup deal to pay back t.a.r.p. is close. our senior economics reporter steve liesman reporting. negotiations are proceeding well and that a deal could happen soon. wednesday cnbc broke the news that citigroup wants to raise $20 billion in an equity offering as part of the plan to pay back t.a.r.p. and stevie will have more in a moment. in just about an hour from now, treasury secretary timothy geithner will testify before the congressional oversight panel on his t.a.r.p. extension and what to do with the leftover money. we'll bring his statements to you live and monitor the q & a as well. >> just a little while ago, president obama accepted his nobel peace prize, acknowledging the controversy the decision has generated and saying there is much more to be done in the pursuit of peace. >> all right. let's hit the markets. we kick it off with bob pisani here at the big board. good morning, bob. >> good morning, melissa. so, dubai, greece, spain, not a problem anymore.
futures are up all around the world and markets are doing pretty well right now. a lot of central banks made some positive comments this morning. several. we'll talk about that a little later. aol will be trading right here on the other side this morning, first time in a long time aol will trade by itself. my favorite analyst's report this morning from cowan, time warner, end of an era. ouch. lilly down 3%. they gave comments ahead of their annual analysts' meeting. their 2010 guidance about in line with analysts' consensus. the important thing is they'll lose patents on a lot of big drugs between 2011 and 2014 and that bigger strategy really wasn't addressed last night. citigroup trading huge this morning. this is patrick. he's the citigroup's specialist right here. important thing, hundred million shares changing hands. we still don't know what part of that $20 billion is going to be needed to be raised in equity and what part in cash. most traders say at least $10 billion in equity. some as many as $20 billion the whole thing. trader talk.cnbc.com. brian schachtman how do we look at the nasdaq.
>> looking good. up in the premarket trade start with apple. "the wall street journal" talking about with the la la acquisition maybe the paradigm will shift instead of just specifically through the computer and your i-tunes software may be more of a cloud computing model. you can get it from anywhere. the london times talking about how ebay fixed price sales now outstripping auction sales so they are growing that business quicker. costco a little light on top. international very strong. up 1.5% in free market. garmin chiming in on the current quarter. things looking good moving forward to 2010. they say sales of the units will be up 10% but prices will be down. they are protecting their margin so far this holiday season. research in motion, the news on rim, rbc checking in on the current quarter. revenue in line. eps a little better than expected. a little bit of verizon android head winds but nothing too strong. up 0.5%. >> when you see the pullback in the dollar index you want to pay attention to what is happening here to gold prices.
we are looking at gold prices up $10 right now and the slight rise we're seeing still has it off about 7% from a week ago when it was about 12.25 an ounce. as dennis garvin points out in his newsletter this morning we could see a correction here to 10.25, 10.6 a and still not break the major bull trend gold has been in since july/august when it was trading around $900 an ounce. oil prices also breaking the losing streak we've seen there around $70 a barrel right now. we do still have a lot of product supplies that continue to pressure prices. natural gas, we'll get that report on inventories at 10:30 am and i'll bring it to you live. rick santelli to you in chicago. >> thank you, sharon. we all look at these numbers on initial continuing claims. we all put it forth as though the news is set in stone. it isn't. there are many ways to look at it. i'll give you these ways. if you look at continuing claims, today the data dropped over 300,000. unadjusted it was up 591,000. if you look at initial claims,
they reported up 17,000. unadjusted they were up 204,000. if you look at emergency benefits that were distributed, they are six times, well 5.7 times more than a year ago at a whopping $327,000. as far as the interest rate market, slightly elevated, but nothing huge. we are looking at $13 billion in 30 years today and the story on the floor is d.c., debt ceiling. they'll raise it anywhere from 1.5 to 1.7 trillion. maybe an emergency fashion. which brings the grand total to roughly 14 trillion with a "t." back to you. >> thank you, rick santelli. mixed picture in asia overnight. here are the numbers. as you can see japan's nikkei lost 1.4%. hong kong's hang seng down 0.2. shanghai composite gained 0.5.
now for something completely different. ross, live in london to show us what's happening over there. >> hey, mark. we're feeling a little better about ourselves in europe particularly on the back side. zax 0.7%, the cac 1.2%. bank of england came out no change in monetary policy. they'll keep the content in place. the program is going to run out in february at which point they'll sit back and rethink it and get the latest inflation report. that has boosted the banks. we have some talk that maybe some of the uk banks have reached a debt rescheduling deal with dubai and all the pressure yesterday from spain means those banks are pressured in europe but we've had a rebound from that as well today. banks doing well. prices down on the two-week, basic resources one of the weaker sectors. oil and gas lacking a bit as well. back you to. >> thank you so much, ross westgate.
citigroup shares in the premarket heavy volume. it tells cnbc that it plans to repay $20 billion in t.a.r.p. funds to the government by raising capital in an equity offering but treasury officials say there is more to it. steve liesman has the very latest. like the 34% stake that the government owns, steve? >> yeah. it's more than just taking out an equity stake, melissa. a treasury official telling cnbc negotiations with citigroup are headed in a good direction and could be completed soon. but the government wants to resolve the whole range of issues it has with citigroup, so it could push a final deal until after the holidays. the official described the negotiations as a moving target. the official said the government is seeking a package that's going to settle the issues of new equity in citigroup, paying back the government, and the $301 billion insurance wrapper the government provided for citigroup's toxic assets. the deal also has to allow the government to unwind what melissa just mentioned the 7.7 billion shares or 34% the government holds from the insurance wrapper. here are the entanglements between citigroup and the
government. there's $20 billion left directly from t.a.r.p. it had been $45 billion. some was converted into the piece below the $7.7 billion common shares, 34% of the company to insure $300 billion of assets. so there's two big pieces out there, a complicated negotiation. i think everybody wants to get it done soon. but nobody wants to get it done and have the media or others suggest that they were taken for a ride. so we asked james bianca earlier whether he thinks it's a good idea for citi to get out and he said the delusition is more costly. banks have massive excess reserves. they don't need to be freed to make investments. they can make them now but have elected not to. so a big question, melissa, about how the deal gets done and whether even if it does get done is that good for the banking system and the economy? >> good question, steve liesman. thanks very much for that update. meantime take a check of shares of citi and the premarket session. again, heavy volume in the
premarket. right now it is indicated to open slightly higher. let's bring in our financial strategist with rockdale securities. dick, always nice to see you. >> thank you, melissa. >> the government is in a bit of a pickle. if citi raises $20 billion that would be bad for the stake that the government owns. how does that unwind the position it has and also allow citi to pay back the t.a.r.p.? >> well, i don't think that citigroup should pay back the t.a.r.p. at this point. i think if you think of all of the involvements between citigroup and the government here, it's much more than was just described. you know, there's the $20 billion in t.a.r.p. there's the $30 billion in common stock that the government owns. the government is also guaranteed close to $60 billion in citigroup debt and there's the $300 billion that they've backed in terms of the toxic assets. so the net effect is just to take out the $20 billionwithout looking at all of these other pieces makes no sense. if they do take out the $20 billion, what does it do? it really doesn't do anything. >> right. >> it doesn't improve the
business. it doesn't improve the company. it's a useless waste of effort. >> let's say, though, dick, that the government is bent on allowing citigroup to pay back the t.a.r.p. citi has about $250 billion in cash in its balance sheet. isn't the government better off letting citi just use that cash even though it depleets the capital ratio? >> yes, it is. i mean, i think, you know, basically speaking, there is $250 billion in cash as you mentioned. there is another $250 billion invested in securities that can be sold and there's about $300 billion in trading assets. so if you add up all of the liquidity of citigroup there's about $800 billion there and that $800 billion is all financed by deposits. if citigroup chose to use that money to make loans, it would achieve much more of what the government wants. >> right. >> than if it pays back the t.a.r.p. >> and not hurt the shareholders out there by being dilutive. dick, i wanted to ask you, longer term this is a good thing for citi to pay back the t.a.r.p. short term it is dilutive. but there is a fluke in the s&p waiting on citi and that is it
doesn't count the stake that is owned by the government. does that then mean there will be an automatic pop in shares of citi once the government gets rid of that stake? >> well, yeah. in other words, the float of citi will go up dramatically if the government were to sell its about 8 billion shares of stock. think about it. if, you know, they raise $20 billion, that's about $5 billion new shares, the government has another $7.7 billion so you're talking about the potential of selling something close to 13 billion shares on a company which has a share base of 23 billion. it's obscene. you don't do that. it doesn't make any sense. >> okay. dick, always good to have your insight on the situation. >> thank you. right now take a look at futures. we are still looking at a higher open right now. dow jones industrial average futures are indicated about 43 points above fair value. in just two minutes scott wapner's premarket stocks to watch including big boxes and the chip stocks. plus mike huckman with another first on cnbc ceo interview.
>> reporter: yeah melissa the big pharma company with the worst performing stock in the sector so far this year tries to give investors a reason to buy the shares. so far it ain't working. the latest from lilly's annual analysts' meeting up next. are turning to fidelity for a smarter way to trade online. only fidelity lets you back-test your strategies against an entire portfolio of stocks. plus you'll get advanced, customizable trading platforms. and you get the kind of execution you'd expect from fidelity... ...with a dedicated specialist to talk about even your most complex trades. they'll even help expedite the account transfer process. trade like a pro. trade with fidelity. smells good. it's a cookie exchange. we're baking up holiday spirit to share with friends around the country. you know, priority mail flat rate boxes from the postal service makes shipping simpler than no-bake peanut cluster. if it fits, it ships anywhere in the country for a low flat rate. so sending macadamia moos to miami costs
hi. we're back. i'm live on the floor with the hardest working man on the floor, warren meyers. official cnbc contributor. means he gets to wear a little button. pop quiz. >> where? >> we haven't gotten you the button yet. >> okay. >> pop quiz. which comes first -- dow 11,000 or dow 10,000? >> well, you asked me this about three -- you asked me right after we broke 10,000. you said 9,000 or 11,000? i said 9,000. i've been a little bit wrong though we haven't hit 11,000 yet. >> giving you a second chance. >> i'll take it and i'll say 10,000. >> 10,000. >> yes. >> well, that's actually the smart bet because it's the closest one. it's only 337 points away. but does that mean you are pessimistic? >> no. i just think the market feels tired. i mean, the only thing that goes against my opinion i think is just carry trade and the dollar. if the dollar continues to be weak we continue to see equities pop up and there's been a little disparage -- a little bit of
movement away from that over a couple days but it looks like it's coming back in this morning and if the dollar continues to go down equities will go up and that's going to be the one thing i'll fight against. >> it's that simple. >> you know this. for the last month and a half. >> it certainly has. >> it's been 100% reverse correlation. >> the problem with those things is, though, they work until they don't work. thanks a lot. have a great day. >> my pleasure. you, too. >> upstairs to melissa. thank you, mark. let's get premarket stocks to watch this morning. scott walker is back at ec making a list checking it twice. >> thanks so much. want to get more detail here on costco and the earnings which beat by a penny. results though mostly in line with expectations. profits rose slightly on higher international sales. weaker u.s. dollar that offset the rise that we've seen in gasoline prices. here's the international comps up 8%. while in the u.s., same store sales rose 2%. you see costco shares here are up about 1.3% premarket. they saw improved sales for hard line goods like appliances,
electronics, and sporting goods. the key membership fees which account for a big piece of profits, and they're a good predictor of upcoming sales grew 5% up from 3.4% last quarter. take a look at amd as well. how about a stock story here? the stock is up 306% year to date. 71% over the past month. today's senate expects gross margins to rise above 45% in 2011 boosting its hopes to become profitable again. it expects to launch new products and did get a boost earlier in the week after intel said it was scrapping plans for a graphic chip. take a look at cnn. the network equipment maker posted a loss and it was wider than expected. they did give an upbeat revenue forecast at cien. >> thank you very much. the futures remain up 620. cnbc's farmer reporter mike huckman is at the eli lilly analysts day with another first on cnbc interview speaking with the drugmaker's ceo earlier this morning. he joins us now with some highlights.
michael? >> reporter: good morning, mark. lilly's annual analysts meeting just got under way at the bottom of the last hour here in midtown manhattan and the chairman and ceo kicked things off by addressing the m & a wave in the sector this year, rosacia buying genentech, merck buying shearing plow saying emfat cli and quoting now this is not our path. lilly executives will spend the next few hours detailing their drug development pipeline and updating their financial picture. so eli lilly says that it expects next year's earnings per share to be between 465 and 485 a share. the street is at 4.74 right now. lilly boasts it has 25 drugs for cancer, alzheimer's, and diabetes among other things in mid to late stage development but the company is staring at two of its biggest selling and most profitable drugs going generic over the next few years. so revenue will fall but lilly says it'll still have strong
enough cash flow to maintain its dividend. it's apparently not enough though for investors because lilly is the only major drug stock that is down this year. the health care reform threat has caused the whole sector actually to under perform the s&p this year but in a first on cnbc interview on "squawk box" this morning the ceo told me he's glad at least that the senate is apparently abandoning the idea of a government-run health insurance plan which he and the industry did not favor. >> our belief is that it's not the right thing to do. we're pleased therefore with what's been reported from the recent senate negotiations although again, mike, we have to really wait and see what's this all about? >> separately, "the wall street journal" today is reporting that the sec is investigating allegations of insider trading surrounding lilly's acquisition of inclone systems last year. the ceo told me he knows only what he read in today's paper and that lilly has not received
any notice as of yet from the sec. check out the blog. and follow me on twitter at m huckman. back to you. >> thank you, m huckman. okay. futures 620. that's the s&p. 6.20 is where we ended. fair value is absolutely what you see is what you get. >> not too bad. final take on the pros we get the buzz beyond the big board on the other side of the break.
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market analyst with evergreen investments. great to see you. >> thanks, melissa. good morning. >> in financials we have reports that citigroup is going to pay back the t.a.r.p. are there opportunities in the sector in your viewpoint? >> i'm viewing the sector with a market weight about 150% since march so i think it remains to be seen. we're in kind of a sprint to pay off the t.a.r.p. and i'm not quite sure what's really driving that. i suspect it's just to get out from under the government's stone. >> it doesn't signal necessarily a top in the space? i don't know. call me a skeptic, john but when i hear the government is looking to unload 34% in citi you have to think maybe the government is seeing something maybe we don't see. >> well, i'm not so sure about that. i question what knew t.a.r.p. funds can be used for. there is concern about the possibility of a stimulus. you know, the stocks have rallied 150% which is why i say it i don't think it's a slam dunk by current levels. let's see how things shake out. the yield curve is still steep but have the banks really been lending or have they been
playing the carry trade? i suspect the latter. >> it's december 10th, john. are we going to see a santa claus rail eight this point. >> i think so. we've been in a very wide trading range throughout much of the year but i think it's important for investors to appreciate that window has narrowed considerably. 1080 is on the downside, as a near term support. 1120 is pretty good resistance. if we're able to get 1120 i see a pretty clear view to 1200 because the technicals are just so strong. >> all right, john. we're watching those levels. thanks for your insight this morning. >> thank you, melissa. >> john lynch. final countdown to the opening bell just on the other side of the break. remember, we are also going to bring you testimony from timothy geithner when it happens probably around 10:30 this morning. don't go away.
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in the headlines at this hour, the u.s. trade deficit narrowing unexpectedly falling to $32.94 billion as a rise in exports will go slightly higher than the increase in imports for october. weekly jobless claims rising slightly more than expected, pushed up by layoffs in seasonal industries. it had fallen for five straight weeks. gold continues its declines down over 7% from its high this morning. gold is actually up a bit. what is that, nine and change, almost ten bucks. >> yep. a weaker dollar behind that this morning. as we count you down to the opening bell we are joined by larry lovin president of secrets of traders.com. good morning to you, larry. >> hi, melissa. how are you? >> good. thanks. s&p 500. i'm hearing from a lot of technical folks 1120 is the level we're watching. we got to break that if we want a santa claus rally. >> yeah. if we want to get above 1120
that would be a nice move, the highs of the year and probably would put us in a good position for the last two weeks to really get close to that 1200 level. one thing i would say is there is decent support if you look a little lower at about 1072, 1073. that's about 15, maybe 20 points below where we are. probably got to get down there before we can really run up to the 1120 area first. one other thing to keep in mind, melissa, is the rollover period that starts today in the stock index. so if you're trading s&ps or dow-jones, any of those things trading march contract today. no longer the old contract. people want to move to that one. >> in terms of the dollar we are seeing dollar weakness. we are seeing the futures pointing to a higher open today. we'll get to the opening bell now. thanks for your time. >> all right. here we go. at the big board, aol, ticker aol. sell braigt its spinoff from
time warner and listing on the big board. our david faber will speak with the ceo tim armstrong in a few minutes. at the nasdaq, windstream. ticker win, provider of telecom services, to world communities. we will talk to the ceo at 10:20 eastern time. second debut for aol amazingly. 1992 the first time it was listed right here on the big board. >> that long? wow. >> yeah. market reporters standing by everywhere you want to be on this thursday morning. we start off with bob pisani here on the floor. were you here back in 1992 for the first time around? >> reporter: was it '92 or -- it was '99 wasn't it? i think it was a little while ago. but it is the important thing here. this crowd pretty boisterous here. p. diddy spun the records at the party last night here went from 7:00 to 10:00 and everybody had a good time by all reports. here's what's important. dubai and greece and spain don't seem to be that much of an issue today. all the big markets are up
around the world. we're opening to the upside as well. by the way, here is aol here. which will probably open just down a bit here. 2367 is where it closed on the issue yesterday and of course david faber is here talking to tim armstrong the ceo in a few minutes. how about lilly? down about 3%. the important thing is 2010 guidance not bad in line with analysts' expectations. remember, 2011 to 2014 is when all their big drugs expire including the antipsychotic drug. that's an issue they have to address. citigroup, huge. a hundred million shares changed hands prior to the open, an enormous number here. the question is when are they going to get that secondary done here? the question is how much they'll have to raise in equity. 20 billion is what they need. they might have to be 10 billion. 10 billion to 20 billion are the numbers being tossed around. the question is will the government also sell its 7.7 billion shares in common they also own? we don't know the answer. citigroup just opening right now up three cents, $3.89.
trader talk.cnbc.com. brian, how about the nasdaq. >> two minutes into trading pretty good up 0.6%, a good pop off the open. quick look at some of the big names. apple up 0.6%. google up 0.4%. amazon up more than 1% off the open. siena their loss wider than expected despite higher revenue. 3.7% to the downside. so facet rejects biogen's offer up 3.5%. jefferies upgrades t. rowe price to a buy. new newscorp also needham initiating a buy with a target of 18. it's currently 12.44. a quick look at ebay up 0.7%. the london times saying basically listen. their fixed price sales outstripping their auction. we always think about it as an auction but they're trying to compete more with amazon and doing pretty well.
let's go to sharon epperson at the nymex. >> the gains here in oil prices are the strongest of the morning. as the dollar index continues to weaken. we're also watching what is happening to prices near $73 a barrel. keep in mind the saudis have now said they will allocate nearly the full contractual volumes to many of their asian refiners. this as some at jp morgan chase are analyzing that. saudi arabia has been above production quotas since may so we are continuing to watch that although open of course at those reduced production targets they are supposed to be adhering to. we're also looking at what is happening to the spread between wti. it has come in over the last couple days and jp morgan is out with the outlook for 2010 saying world oil prices will be under pressure through the first quarter but we'll see prices rise toward $120 a barrel going toward 2013. as you look at energy prices across the board, we may see the
refined fuel prices put a little cap on it where wti is right now. after all we did see the huge rise in product supplies of about 4 million barrels just in one week. rick santelli, to you in chicago. >> reporter: thank you. let's talk about two things. there's this new optimism regarding the dollar and there's debates as to whether or why the dollar is moving higher. but outside of that debate, deleveraging is the word i hear on the ladder. on the former, keep in mind the dollar index isn't the best representation because within the dollar index or outside of it you might have certain currency doing better or worse. but the index alone, the cash index, was done a bit yesterday and it's down a bit today. so we have two days. not only that the cash index is below 76. it's hard to put a positive spin on that. it seems as though all of the sovereign issues that bob is aptly pointing to, the market doesn't seem concerned about. those were motivators for deleveraging and, remember. the market wasn't concerned prior to the credit crisis
either so that isn't the only litmus test. second thing, 30-year auction today. 13 billion. i'm starting to hear some investors say, listen. i know there's a lot more risk on the longest maturity on the curve but we're reaching for it and we think we could dance between the rain drops. so there might be more of a game with the 30-year than just a residual, very average auction of the ten-year maturity, the other long dated on the curve. back to you. >> thank you. quick check on the markets right now. the dow is open 71 points to the plus side. the nasdaq is up almost 15 and the s&p is 7.6 to the good. your cnbc edge now. the chief investment officer of harris private bank and i'm going with neil here. could be dr. phil. they're never seen together. he's the chief investment officer, portfolio manager of
hennessey funds. good morning. >> good morning. >> where are we headed? going to 11 or back to 10 on the dow? >> i think we're going a lot higher. i mean, the retail investors still paralyzed and fearful. you can see that through the numbers, mark. if you really look at it, where is the money going? especially in mutual funds. almost a hundred percent is going into bond funds which tells you that's not where you want to be. in fact, just last week alone money was pulled out of equity mutual funds to the tune of about $3.5 billion. and $10 billion was added to the bond fund arena within mutual funds. over $400 billion has been added there this year. so as people start to get back towards even or close to even they're taking the money off the table because they don't believe that we're in the long-term secular bull market. >> all right. jack, what do you think? >> well, first of all, i don't think we're in a long-term secular bull market but i do think we have probably another 15% or so to go to the upside.
valuations are full. if you look at, for example, the price to sales ratio, investors anticipate a roughly 10% revenue growth over the next four quarters. i'm going to put that somewhere between most likely case and best case. but we do have a lot of favorable technicals, a lot of momentum, a lot of cash on the sidelines. zero percent interest rates prompting people to take incremental risks. i think if you look back in history whenever we're about 18% or so where we are right now, above the 200-day moving average, that in general that corresponds to roughly a 15% or so gain over the subsequent four quarters. we'll see what hams. >> neil, what is your favorite part or parts plural of the market? well, i mean, i like a loft the markets. you know, all kinds of different sectors. what i'm looking for going forward, mark, is i think companies because of the cash flow, any incremental increase in revenue is going to drop to the bottom line. i think next year you'll see a
lot of companies initiate dividends and raise dividends going forward which in turn will make the stocks go up which will make the market go up which will make the personal wealth go up which in turn make the consumer confidence go up which in turn is going to make the economy as a whole, on a whole a lot better. >> but don't we need to see significant progress in the labor market before you're really going to have a comfortable consumer? >> what you're seeing is business is hiring but they're hiring on a temporary basis. they're not hiring full-time yet. but that will probably start in the second quarter of next year as they start to look out. companies beyond most people's expectations are actually making money and hiring people but people just don't see it. >> all right. jack, 15% is 1500 dow points. so that would bring us close to 12,000. what parts of the market would you focus in on? >> sure. i would say, you know, globally
we like international small cap. it's the cheapest market worldwide. incrementally we think the emerging markets are the most expensive relative to kind of the broad brush. within the s&p 500 we like pro cyclical sectors like basic materials, consumer discretionary, finance, and technology. >> you like consumer discretionary even though the labor market isn't perking up? >> yeah. actually, what i would argue here is that there are really two parts of consumption. one is the discretionary items that can be purchased for cash. the other is the discretionary items that have to be financed and, clearly, anything that needs to be financed like autos, furniture, big ticket electronic items and appliances, are dead in the water but what we are finding is that consumers are surprising analysts and economists to the upside on discretionary items that can be purchased for cash like apparel,
vacations, dining out, and so i think there are going to be pockets of the discretionary sector that will still surprise us to the upside. >> thank you very much, gentlemen. have a great day, guys. >> thanks. straight ahead, he just rang the opening bell as his company officially spins off from time warner. now aol chief tim armstrong will join us live at stock trading lower right now. and later, agencies clearly not bullish on many foreign countries. will problems in spain, greece, ireland, and other countries, stall any recovery here?
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welcome back to "squawk on the street." fresh off the opening bell here at the stock exchange we are joined by the aol ceo tim armstrong. great to see you. >> melissa, thanks for having us. >> congratulations. wall street though is a little bit skeptical about the prospects for aol. they say that the prospects as a stand alone company are unclear
and they point specifically to ad revenues which have been down, double digit percentages for the first nine months of this year. what's your game plan? >> i think two things. one is we just say we live in the show me state and investors should expect to see changes in metrics from us over the coming years and it's a turn-around situation. you know, i think we have a lot of expertise in the ad business already. we're a multibillion dollar company in the ad business and we have great technology and great people around that business, so we're making strides right now and been there for about eight months and, you know, internally we see a lot of progress. hopefully that internal progress will show up in external metrics. >> at the same time you have pretty formidible competitors. you come from one of them. that is of course google. you've got ya hoo, microsoft, yahoo and microsoft already have a deal in place. google has a whole bunch of technologies that allow the sale of graphical ads over the internet much more easily. how are you going to catch up? >> first of all i think our competitive set is ourselves right now. i think we have a great content
business. we're probably the largest producer of content. you know, right now for a large company on the internet and i think we'll continue to go down that path. our key to success is being great content, aggragating audiences and having great partnerships so when we look at the competitive landscape i think it starts with us so we have to execute ourselves and look at i think the internet is about cooperation, also. we partner with all the companies you mentioned as well and it's our business to take and that's where we're going to be focused. >> are you looking to increase your alignss with some of those competitors out there? is that the key for you? >> no. i think the key is executing our strategy and making sure that we know our business and i think we have employees all over the world, we have a clear strategy we decided on july 24th of this year so number one game for us is execution. number two is those partnerships are important on the internet and i think you'll see us with more partnerships in the future than aol currently has. >> how do you live away from subscription based revenues and also from the investor perception that aol is that
dialup company where you pay a subscription and you get onto the internet? >> sure. we have about 100 million users in the united states on our web properties. we have about 5 million paid users and out of that paid users less than half of those are dialup access so i think one thing that surprises people is aol is seen as still being an access company but it's a small percentage of our overall audience in the u.s. with about 260 million people on our properties globally. we love our paid members. it's a great business for us. and we're going to continue to show them the love. but we have a lot of love in the media business, a lot of love in the content business and that's where the future of the business is going. >> ubs this morning initiated aol stock with a neutral rating and again wall street is pretty skeptical at this point. in one year will aol still be a stand alone company traded on the new york stock exchange? >> i believe so. >> you believe so. >> yes. >> it will still be. >> we'll see. you never know in the internet space but really our goal is to be an independent company to execute in that direction. i would say on the stock price
and other things, that's what you guys are experts in. we're experts in running media and content and advertising business. i think as long as we take care of our consumers and take care of our partners and advertisers and employees the rest will take care of itself. >> but you never know. that seems to leave the door open. >> well, you know what? hopefully we'll be independent but that's what we're planning on so i think it'll be an exciting year for us. >> tim armstrong, thank you so much for joining us. >> thanks for having us. >> ceo of aol fresh off the opening bell at the exchange. in this morning's street cap, the swedish government wants gm to decide this week whether it will sell saab. that according to published reports in sweden. gm has said it would consider offers until the end of the month then decide to close the unit if it can't be sold. panasonic taking majority control of sanyo electric. it's a $4.6 billion deal. panasonic gaining sanyo's
expertise in solar panels and rechargeable batteries. the trust that controls chocolate maker hershey close to a decision on whether to make a bid for cadbury. according to "the wall street journal" it is leaning toward doing so. cadbury currently resisting a hostile bid from kraft foods and might find a hershey's kiss more palatable. just around the bend, tvwise, stocks on the move including a wholesaler and communication equipment maker. plus, gold seems to bebreak its losing streak and heading back up today. could we be on our way to $1500 an ounce? rrrrrrrrrrrrrrrrrrrrrrr
over the past month up about 1% or so right now. today it's said it expects gross margins to rise above 45% in 2011 boosting hopes of becoming profitable. it did get a boost earlier in the week as well. let's talk about costco as well. it beat by a penny. results came in mostly in line with expectations though. profits up slightly on higher international sales and a weaker u.s. dollar which offset the rise in gasoline prices. how about these international comp numbers, too, up 8% in the u.s., same store sales up 2%. they saw improved sales for key hardline goods like appliances, electronics, and sporting goods and those key membership fees don't get talked about a lot but they are important because they account for a big piece of profits and a good predictor as well of upcoming sales that grew 5% and that was a bump up from 3.4% last quarter. how about ciena? shares hit this morning. the network equipment maker post'd loss wider than expected and did give an upbeat revenue forecast saying order flow indicates a 5% sequential
revenue growth in the first quarter which would mean about $185 million and that is above expectations. visa and mastercard raising the price targets on both. visa goes to 86 bucks or from 86 to 98. mastercard goes from 250 to 285 citing increased conviction both companies could grow earnings more than 20% over the next few years. they say our forecast did not assume a rebounded economic data but rather continued stabilization at these current lower levels. then there's viacom. jefferies starting coverage with a buy rating says there is room for margin expansion once advertising revenue rebounds. guys, back to you. >> thank you very much, scott wapner. well, gold today breaking its losing streak. in fact the precious metal is up today by almost one full percentage point, 1131.5 an ounce u but it is still down about 7% since it began its decline two weeks ago. even with gold's recent weakness some strategists think the next stop could be 1500. are we still headed in that direction? should you use a pullback as a
buying opportunity? here to tell us more is michael widmer the metal strategist at bank of america merrill lynch. great to see you. >> hello. >> some people might think gold is in a bubble. is it? >> well, i don't think it is really in a bubble right now. if you're looking at what actually drove some of the buying you still see a lot of reserve, for instance from central banks, reserve diversification by definition means that they're not necessarily looking for -- they're not buying into the gold market because they expect huge price rises but because it is a good diversification. some of the buying we do see is not driven by people chasing the price up immediately right now. i think the bubble argument right now is not necessarily applying. i think fundamentally the gold market is relatively strong and remains relatively well supported. >> the notes we've got from you say you think we could hit 1500
on gold but over three years. correct? >> that's correct. yes. i think what we're seeing right now, what we've seen in the past two days is actually one of the scenarios why we're a little cautious for the immediate near term. and that is you do see a bit of the economic data out of the united states right now, you do see the dollar coming back a little bit. and i think all of that -- all of that means that the immediate reasons for investors for instance to hold gold may be are not there right now. so you're moving into next year and i think that scenario may still play out but if you are looking in the medium term on those $1500 pounds are really a medium term target i think you can still make an argument for continued diversification from central banks for instance. you can make an argument that emerging markets continue to buy gold as well. >> and one of the reasons you think is, this is going to happen, is you expect the dollar to remain weak, right?
>> well, i think for next year we actually have got a house forecast of 128 dollar versus the euro so i think immediately for next year i think the dollar will be less of a factor. in the medium term i think there is a lot of concern about the liquidity that is out there in the system, a lot of concern about the assets that some of the central banks are holding. not necessarily immediately dollar related but just concerns about making sure that you don't lose too much of your portfolio and therefore you do see that reserve diversification. >> right. >> that is one of the key reasons we think it could move higher. >> michael, thank you very much for your time. michael widmer bank of america merrill lynch. >> i don't know whether the folks at home can hear it but i will mention if you hear like a faint sound of thunder behind us, it's a fan. >> it's not danger. it's a banld. >> a band warming up for a tree
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breaking news from capitol hill. treasury secretary timothy geithner getting ready to testify before the congressional oversight panel on the t.a.r.p. our senior economics reporter steve liesman has a copy of the secretary's testimony. have you ever noticed how steve always comes up with a copy ahead of time? i wonder. >> nothing like having anonymous sources, mark. >> actually, it's released ahead of time. >> yes. >> with the proviso that we don't use it. >> exactly. >> go ahead, steve. >> the treasury secretary will lay out very strict rules for using additional t.a.r.p. investment. he will be testifying here and we'll have the top of the testimony here and be covering it all day long. and he's laying out strict rules. he'll say new t.a.r.p. money as we extend t.a.r.p. into october, 2010, housing and the foreclosure assistance, giving
monday oir loa money to small banks and aiding small business. he is saying the treasury is considering increasing its commitment to the program it does to help asset backed securities for consumers and small business. he says this will have no cost to the taxpayers. the treasury will retain authority to use t.a.r.p. in emergency situations so if there is another financial crisis he says the treasury will retain the ability to come in and give aid to the financial system. he says this will increase the likelihood we never have to do it. he talks about the economy saying the financial and economic conditions continue to improve and borrowing costs have fallen for a range of borrowers. substantial private capital has been raised touting the stress test and how that helped bring in more than $100 billion to the banking system. the improvements from the financial crisis he says are, quote, remarkable. he repeats the warning that a premature exit from stimulus can prolong a financial crisis but recovery still faces sig canned head winds. among them unemployment remains high as do foreclosures and
delinquency rates. borrowing costs have fallen for businesses, home owners and municipalities. that is the flavor of what he is saying here. we'll be following this all day long during the q & a which as you remember a week or so ago was pretty contentious. >> yeah. looking forward to that again. >> yep. >> love that contentiousnescont. all right, steve. you stay right there. rick santelli, another man who enjoys contentiousness and hampton pierce yet another man who enjoys contentiousness. also with us to talk more about the t.a.r.p. hampton, i guess geithner is going to get a hard time from certain members and always will no matter what he's talking about, right? >> remember this is an oversight committee so it's their job to kind of hold his feet to the fire. given the outline that steve was talking about and i saw the testimony as well, listen to the q & a among other people from the chair, elizabeth warren,
who's pretty much laid out a case on our air as a matter of fact yesterday that, yes, while t.a.r.p. did pull us back from the financial brink, it still has not done enough for the real, so-called real economy or main street economy. look for her to press the treasury secretary about his priorities going forward now that we know there's going to be at least another ten months of t.a.r.p. but at the same time within the confines of the statutes. now, some say t.a.r.p. is written where it's big enough to drive a truck through that you can kind of make it do whatever you need to do. however, i do think he's going to get pressed on, okay. if you're going to help small business, the main street economy, perhaps even try and find ways to create jobs through the use of t.a.r.p., how do you do it within the confines of the statute as written and not venture off the reservation? yeah, there are other members of this oversight committee and this is the time to be creative, the time to use t.a.r.p. to think a little bit outside the
box and create jobs. >> i think as a pall over allof this is how politically unpopular t.a.r.p. is. >> yes. >> and i think one of the things in this testimony as well is the treasury secretary taking pains to say, we're using the money paid back by the banks for deficit reduction. we broke the story a few days ago that $175 billion is expected to be paid back over two years and will go to deficit reduction. >> rick? >> yes. >> go ahead. >> we need to get the semantics right here. this is money. we can even question that value. what is left in t.a.r.p. is not money. it's unallocated debt. it's credit cards that they promised to cut up if they didn't use and i think elizabeth warren, who everybody i know seems to be a huge fan of, outlined quite clearly yesterday on cnbc that exactly how you use the unallocated debt may not be in accordance with the promises originally made. >> all i'm saying is from a market's perspective, the amount of money the government was
going to borrow was a fact in the market. okay? and what the treasury has said over the last several days is the amount we're going to borrow is going to come down. to the extent that those numbers have weighed on the dollar for example, some of that is better than was expected by the markets. real money, real dollars have been paid back by the banks. that's one element. and real money that won't be spent is money that doesn't have to be borrowed and is part of the market projections. >> guys, we'll leave it there. we should note we've mentioned elizabeth warren. you see her there in the blue blazer, one of the panel members giving some opening remarks. the panel members will all give remarks and once the treasury secretary begins speaking, we will actually bring you his testimony live. >> not all of the members of this committee are members of congress. are any? i'm not sure. are you still there? >> yes. you know what? ham i'm not sure about that myself. i know there is a representative from organized labor. there is of course the chair.
i'll double check. >> just off the top of my head i couldn't remember whether there were any members of congress. so maybe they won't blow the ape too long was where i was going with that. anyway. >> all right. of course overlaid over this entire hearing is our reports that citi may be approaching paying back the t.a.r.p. itself. already $118 billion in t.a.r.p. funds have been paid back by the banks. citi may announce very shortly that it will also pay back the t.a.r.p. bertha coombs is outside citigroup headquarters with more on the news. bertha? >> melissa, citi would certainly like to reach a deal sooner rather than later. a treasury official tells cnbc that the negotiations for a deal right now are a moving target though they are moving in the right direction. what makes it so complicated for citi is the fact that of the 45 billion the government gave the bank in t.a.r.p. funds, $25 billion of that was converted
into an equity common stock stake in the bank. the treasury officials say any deal must be a complete package that allows the government to unwind its position. so on vikram pantd's to-do list is to get not just the treasury and fed to sign off but the fdic which wore bits citi's capital ratios. they also have to figure out how to unwind the 34% stake the government has without diluting shareholder value, also how to unwind the government guarantee of its toxic assets which are somewhere in the range of 200 to $300 billion. and how much money agreeing with the government they'll need to raise in order to repay back and meet other stipulations. dick parsons saying yesterday they're ready to do that. >> there is an active discussion we have to have and it's appropriate with regulators who need to be sure it won't be a situation where you give back one day and have to come back
again down the road. >> one of the issues may be stipulations, remember bank of america yesterday completed repaying its t.a.r.p. money but it had to sell some assets. citi may have to raise more equity than it -- than the cash that it actually owes the government in order to satisfy some of those stipulations. shareholders yesterday sold off the stock recovering a bit today. the big question is who might they sell the equity stake to? the kuwaiti investment authority just this week sold its stake in citi so you wonder what kind of appetite there might be for this offering. back to you. >> thank you very much, bertha coombs as you saw there citigroup stock trading higher by about 1%. let's go to maria bartiroma who first broke the story on the cnbc news line with the very latest. >> hi there, melissa. thanks very much. of course there is another group that citi is worried about in terms of answering to and that is shareholders. it's been a day and a half of meetings at citigroup with dick
parsons as well as talking to major shareholders about this equity raise. what we're hearing now is the company is trying as best it could to resist requests to raise as much as $20 billion because it is so dilutive. i suspect we'll see the equity stake announcement after the close tonight or tomorrow and they are trying to come up with the right number. it may very well be below $20 billion because of the dilutive situation here. some share holders are balking at the number and would prefer to see something in the range of $10 billion to $15 billion. regardless we are going to see an equity raise as part of this payback of t.a.r.p. money and we're going to get that announcement shortly. what's interesting here is the treasury is really pushing aggressively on this deal. wanting them to do whatever they can to pay the money back. citi insiders are trying to make the case that they can use some internal funds so that they don't have to do a full $20
billion equity raise. of course this is all on the heels of the bank of america successful offering and ability to pay back the money and they figure they should do it sooner rather than later while the markets have so far been responsive. so we'll likely see that capital raise announcement in the next couple of days and again it could be as much as $20 billion but insiders are hoping they don't have to do the full 20 perhaps closer to between 10 and 15. melissa and mark, i'll send it back to you. >> thank you, maria. all right. let's find out how the market is dealing with everything that's going on today. our reporters are standing by. bob pisani, start the parade. >> and of course citigroup trading nearly 200 million shares down here, mark. big trader preopen over a hundred million and of course betting is that it will be around 10 billion to 15 billion. maria is right. that's the talk. what else do they do with the 7.7 billion shares that they own of common as well? that's part of the negotiations. take a look at some of the big banks. not really doing much. in fact the banks haven't been
doing much for several months now. jp morgan has been in a gentle downslope. morgan stanley a gentle downslope. bank of america really has been doing nothing. these banks have not been contributing to the recent market rally we saw in the month of november. how about the other groups? dollar is down. risk assets up globally. you got some of the big metal names up like alcoa. got a lot of the energy stocks. five down days in a row for the energy complex really getting attention when exxon dropped five days in a row. all of those stocks are to the upside today, a very important turn-around here. an end game in the senate for the hmos. all those people kudos who bet there would not be a public option. it seems like that is what is going on here. cigna and some of the other hmos at 52-week highs. aol trading right here behind me began trading this morning and fairly light volume, less than 2 million shares right now but still fractionally to the upside. trader talk.cnbc.com. how are we looking at the nasdaq? >> doing okay, bob. thank you very much. up half a percent off the highs just like you but, still, green is better than red. unless you're short. listen, adams checked in on the
handset market and said year over year sales are up but there is a little distinction between winners and losers apple trending better than expected, palm worse than expected and rim research in motion right in the middle kind of neutral. some other names doing quite well today, oracle up 2.2%. amazon.com up 2%. the news out of dish network they reached 14 million customers. up 1.9%. steel dynamics down 0.2%. q 4 guidance below expectation. a quick check on a few other big names. cisco up 0.9%. intel up 0.5%. let's go to sharon epperson at the nymex. >> reporter: gold and oil continue to trade tick for tick with the dollar index. if you look at the dollar index it's basically flat right now. you'll understand why oil prices are basically flat right now as well. and we have gold prices that are off of their highs this session. but we are seeing a little bit of an uptick there in gold. keep in mind though gold has sold off krnly in the past week. a week ago we were looking at
gold prices topping $1226 and now we're looking at this level right here at $1129. as we look at what is happening in natural gas prices we're waiting for that data from the energy department expected to show for the first time in the season a withdrawal on natural gas supplies. it should be between $44 and $48 and we get that at 10:30 a.m. eastern time. back to you. all right. boy, i'm pretty sure you can hear that band now if you couldn't before. >> very festive. >> festive and loud. that's what it is. it's a band warming up. up next, an early christmas for some of the nation's retailers. we'll tell you about their billion dollar payday. >> and timothy geithner talking t.a.r.p. before the congressional oversight panel. we will take you there when the testimony begins. the entire hearing is in fact streaming live on cnbc.com. we do have clarification about the panel members. one member is a representative from the state of texas.
there's the answer. >> and a union member and it's a cross section. >> exactly. all right. as we head to break take a look at the biggest percent gainers on the s&p 500 this morning. topped off by pall corp $2.40. all right. i believe timothy geithner is about to begin his direct testimony. we're going to carry it plus some of the q & a. >> as you noted we faced one of
the most severe financial crises in the past century, a deep, economic contraction. and we've now begun to turn this around. confidence in the stability of the financial system, in the security of american savings, has improved dramatically. credit is flowing again. the economy is now growing. borrowing costs have fallen. businesses have raised substantial capital from private markets. housing prices have stopped falling in many parts of the country and job losses have slowed at a pace that is more consistent with stronger recoveries than weaker recoveries. however, this is a very tough economy and households and businesses still face very significant challenges. unemployment of course is very, very high. commercial real estate losses weigh heavily on many small banks impairing their ability to extend new loonls. credit is tight for many small businesses. foreclosures driven now principally by unemployment are very high. today i want to outline our strategy to address these challenges going forward and how we're going to wind down and
ultimately exit the t.a.r.p. there are four elements to the strategy. first, we will terminate and wind down the emergency programs that were put in place at the peak of the crisis necessary to break the back of this financial panic. in september we shut down the money market guarantee program which earned taxpayers $1.2 billion. we've effectively shut down now the capital purchase program under which the majority of t.a.r.p. investments in banks were made. second, we will limit new commitments under this program in 2010 to three areas. housing, small banks, and credit markets for consumers and small businesses. for housing, we'll continue to work to mitigate foreclosures for responsible american homeowners as we take the steps necessary to continue to help stabilize the financials of the housing market. for small businesses we've recently launched initiatives to provide capital to small and community banks to increase lending to small businesses and we are reserving additional funds for additional efforts to facilitate small business lending. finally, we're going to continue to support the securities
markets that are necessary for credit flows to consumers and small businesses. third, beyond these limited new commitments we will not use remaining eesa -- these are t.a.r.p. funds -- unless necessary to respond to an immediate and substantial threat to our economy stemming from financial stability. a determination that i will only make after consulting with the president and the chairman of the federal reserve board and submitting written notification to congress. fourth, we will continue to reduce our financial stake in banks and manage our other investments. we'll keep the government out of the business decisions of these companies and we will exit from our investments as soon as is practical and return ownership to private hands. this strategy requires a limited temporary extension of the authority provided by the congress under the emergency economic stabilization act. it would be irresponsible to do otherwise. the expected costs of t.a.r.p. have fallen dramatically. while we are extending the
program we do not expect at this point to deploy more than $550 billion in total. we also expect up to $175 billion in repayments from banks by the end of next year, substantial additional payments thereafter, and as a result, we now expect the ultimate costs of t.a.r.p. will be at least $200 billion less than was projected as recently as the august mid session review of the president's bunlt budget. we expect to make, not lose but to make money on the $245 million in investments in banks. we estimate the t.a.r.p. programs for banks will yield a positive return of over $19 billion. indeed, banks have already repaid more than $116 billion in investments. the stress test of the major financial institutions helped accelerate repayments by providing markets with the transparency and the confidence necessary for banks to be able to raise capital from private sources. these programs as you know have generated significant income, roughly $15 billion which have been used already to help pay down our nation's fiscal
obligations. of course we do not expect all t.a.r.p. investments to generate positive returns. it's unlikely we will be repaid for all of our investments in aig, gm, and chrysler but even there the outlook has improved and you'll see new estimates in the report we're issuing today. we're going to continue to manage t.a.r.p. in a transparent and accountable manner. earlier this morning treasury published the first annual or maybe sometime today. i'm not sure it's out yet. published the first annual financial statement for this program. these statements discuss in great detail the operations, impact, expected costs of the program. gao provided an unqualified audit opinion of the statements including there were no material weaknesses in internal controls and this is a notable achievement for the men and women that have helped put in place this very complicated, very important program in a very short period of time. let me just end by emphasizing as you did the importance that we continue to work to reinforce the process of repair in our financial system. it is absolutely essential to try and make sure we establish a strong recovery that will put
americans back to work and it is very important because of the consequences created by the actions necessary to put out this financial fire that congress moved to adapt a strong and comprehensive package of financial reforms and i'm encouraged by the progress we've seen today. there's a lot of challenges ahead in getting a strong package in place. i know you played a very helpful role in trying to help bring some thoughtful insight to those choices and i hope you'll continue to work with us to make sure we have the strong package of reforms in place as quickly as possible. thank you. >> thank you, mr. secretary. let's start with your statement. you say as part of the extension that you want to focus any new spending on housing, small banks, and supporting credit to consumers. let me -- small businesses. let me focus on the small business initiative. i understand the importance of the initiative. this is the one part of t.a.r.p. that may have a direct effect on
unemployment or maybe the most easily traced effect on unemployment if small businesses can borrow money then they'll be able to stay in business and keep their employees or hire more employees. so i understand the importance of this and applaud that approach. but my concern is that last spring treasury launched the program to stimulate small business lending, i think it was not a success. later treasury announced a program to purchase up to $15 billion in securities backed by sba loans and i believe it's the case that so far treasury has not spent a single dollar under that program. and two months ago treasury announced a third program to support small business lending by providing low cost capital to community banks and as i understand it so far nothing has happened. so, you know, it's not news to anyone that small business lending is important.
small businesses are closing every day. but treasury has now announced three plans and, clearly, has not gotten the job done. what's going to be different now, mr. secretary? >> let me just start by saying the economy would not be growing today without t.a.r.p. unemployment would be dramatically higher today without the actions we took to help save the financial system and open up the markets that were so broken. let me walk through those specific programs you pointed out. to get small business lending going again, small banks, small business as you know depend on banks overwhelmingly for credit and small banks provide about half the credit small businesses get from the banking system as a whole. small banks are among the most affected still by the challenges facing the economy. many of them are going to need more capital. those that need more capital are cutting back on lending and commitments and as you said it's affecting small businesses. in our judgment, to address this requires a set of different approaches. we actually have been quite successful in bringing liquidity back to the securities markets that are important for small
business lending. it's one reason why small business sba loans have increased so much. the sba program providing temporarily higher guarantees, lower fees, is also helping though those programs are small in total magnitude. but for this to work, we have to make it possible for banks to come get capital from the government so they can support more lending. banks have been very reluctant to come and the reason the 7 a program we referred to has not yet been launched is because the institutions necessary to make it work have been very reluctant to come and do business with the government and they're concerned that if they come they will be stigmatized and they will be subject to the risk of conditions in the future that might make it harder for them to run their businesses. so if we're going to be effective in dealing with this we have to find some way to mitigate both the stigma of coming and the fear of changes in the future rules of the game that are going to apply to them. that's going to be something we cannot do on our own and will
require some help from congress to help deal with those basic concerns. but i think you're right to say that unless banks have access to capital, this is going to be a harder problem to solve. >> but let me just follow up, mr. secretary. i'm afraid i'm a little confused here. you were talking about small banks as the most effective lenders to small businesses. and we know this to be true. >> they're about half the bank lending to small business. >> but i thought you started by saying you were going to terminate and wind down the capital purchase program and then i thought i just heard you say you were talking about putting more capital into small banks. >> yes. >> i'm a little confused on this. >> again, the emergency programs that were necessary to break the back of the panic and the capital programs for large banks we're now confident we can wind down and put out of their misery. but as you said, the president announced a program for capital for small community banks a few months ago. that's important and we'll preserve that and we're exploring ways to build on that
but for it to work, chairman, we need to make sure, make it more comfortable for banks to be willing to come. >> let me just though if i can pinpoint how can it be that we can -- >> all right. we're listening to treasury secretary timothy geithner testify and answer questions of a congressional oversight committee. we'll continue to monitor developments out of this. if you want to see the entire hearing go to cnbc.com. people think that honda is always the most fuel efficient choice. well, this chevy cobalt xfe has better highway mileage
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welcome back. timothy geithner talking t.a.r.p. before the congressional oversight panel. we are monitoring the question & answer session and will bring you developments as they warrant. the entire hearing is streaming live right now on cnbc.com. >> all right. we just got the natural gas inventory number and for that we go to sharon. >> in case you blinked and you're wondering why the entire energy complex has turned around and is rallying right now we got a surprise decline in natural gas storage levels of 64 pcf. most analysts were expecting somewhere in the range of a decline between 44 and 48. this is the first withdraw of the season. 64 is a big number and much bigger than analysts anticipated. as was thought we're looking at natural gas prices that have rallied 36 cents in about one
minute's time here. we're above $5. $5.30 right now and looking at oil prices above $71 a barrel. again, all of this is on the natural gas number and we already have a lot of natural gas in supply but this is still a big withdraw here for storage as we have this cold weather hitting all over the u.s. back to you. >> thank you very much, sharon epperson. we want to bring your attention to some stocks on the move. we go back to scott wapner at hq. >> okay. thanks so much. let's start with visa and mastercard this morning because the price target was raised on both stocks visa going from 86 bucks up to 98. mastercard goes from 250 to 285. you see the movement in the stock right there. citing increased conviction that both companies could grow earnings more than 20% over the next few years and they say our forecast did not assume a rebound in economic data but rather continued stabilization at the current lower levels. let's look at amd as well. you want to talk about a winning stock story if you invested in this stock 45 weeks ago boy are
you happy because the stock is up 306% year to date up 71% over the past month as well. today saying it expects gross margins to rise above 45% in 2011, boosting its hopes of becoming profitable yet again. you got a boost earlier this week as well after intel said it was scrapping plans for a graphics chip. then costco is certainly the talk this morning. it beat by a penny. results came in mostly in line with expectations. profits up slightly higher. international sales are really the key here. the weaker u.s. dollar certainly. that offset the rise in higher gasoline prices. internationally and here is the story i'm talking about comps up 8%. u.s. same store sales rose about 2%. they saw improved sales for hardline goods, appliances, electronics, and sporting goods. membership fees are key because they account for a big piece of profits and a good predictor as well of upcoming sales. they grew 5% and that's up from 3.4% in the last quarter. ciena shares hit this morning. the network equipment maker post'd loss that was wider than expected and did give an upbeat
revenue forecast though saying order flow indicates a 5% sequential revenue growth in the first quarter which would mean about 185 million bucks and that's above expectationings. viacom, jefferies starting coverage there with a buy rating saying there is room for margin expansion once advertising revenue rebounds. take a look at viacom shares there a little higher this morning as well. >> thank you. today marks a new chapter for aol. the company trading here at the big board independent of time warner. on to the symbol aol. nearly ten years after the disastrous merger aol's ceo tim armstrong tells cnbc he is ready to do battle against google and mr. softy. >> our competitive set is ourselves right now. i think we have a great content business. we're probably the largest producer of content. you know, right now for a large company on the internet. i think we'll continue to go down that path and our key to
success is being great content, aggregating audiences, and really having great partnerships with advertisers. i think when we look at the competitive landscape it starts with us. >> the aol time warnler merger just one defining moment of the past ten years. another being all the bubbles. that of course the terms of david faber's cnbc reports tonight the bubble decade. there is a real nice symmetry here for long-time viewers. because david and i were there at the wedding. we had kay on "squawk box" that morning. >> january 10th, 2000. >> now we're here at the divorce. part of your special on the dot com era, names like pseudo.com, things like that. >> we take a look at the entire decade as you might expect, mark. the decade began at the height of one bubble which then imploded and then of course we had the, well, you know the rest of that story. but we are going to take a look tonight at a company called pseudo.com. that was the brain child of an entrepreneur named josh harris
who was actually into the dot com game very early. you may remember jupiter communications a firm he began in the early '90s. pseudo.com was started in the late '90s and was a bit ahead of its time. in fact, it had almost no chance to make money. but while the air was in the dot com bubble harris soared. after founding the successful internet research firm jupiter communications in the early '90s, harris moved on to more eccentric pursuits. listen to how you describes pseudo.com, a broadband content provider he launched in 1999 with $30 million. >> it was art. >> it was art. but i shouldn't view it as you raised $30 million for an art project. >> yes, you should. it's true. >> that's the definition of a bubble. pseudo was positioned as an internet video provider that would one day compete with the likes of abc and nbc and cbs producing original programs.
with 250 employees and a swanky loft office in sojo, new york, harris became the poster boy for internet extravagance. you had a lot of parties? >> that's how i kept the name out. >> but pseudo.com had one big problem. >> i was the internet television company. i had no market. i was making broadband programming. >> when there was no broadband. >> when there was no broadband. >> harris was in on the joke and put plenty of his own capital behind what he now calls his art project. but there were scores of other companies with fatally flawed business models that were also doomed to extinction the minute the money ran out. oh, man. it makes you miss those days in some ways. you, me, sitting there every day. suspension of disbelief only growing. the bubble decade tonight. of course we don't just look as i said at the dot com bubble but the cheap money bubble both in real estate and private equity. try and sort of encapsulate this decade for people.
>> we had no shortage of bubbles to cover for sure. thank you, david. we'll be tuning in and tivoing. we are monday the geithner hearing and will bring you any relevant headlines. if you're really enjoying that sort of thing, you know, kind of like steve liesman. you can watch it in its entirety streaming on cnbc.com. >> coming up next, the billion dollar plastic payout that is causing a rumble in the retail sector. you're watching "squawk on the street" on cnbc. tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that's when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out.
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81. not too shabby. nasdaq up 14.5. and the s&p 500 is up 8.50. on the big board, it's about 2-1 in favor of advancing issues. same thing on the volume. up volume about 2-1 over down volume. on the nasdaq, a very narrow advance in terms of about 130 more stocks up than down. >> okay. retailers across the country are getting an early billion dollar holiday gift. jane wells is in los angeles with that story. jane? >> hi, melissa. couldn't come at a better time. visa and mastercard have agreed to pay out the last $1.1 billion of a settlement owed in a lawsuit. now, the class action suit led by law firm constantine channing represents over 600,000 retailers who claim they were over charged by visa and
mastercard when customers were forced to use debit cards instead of credit. they were forced to pay out fees when they used cheaper debit cards instead of credit. both sides settled in 2003 for $3.4 billion to be paid out in installments through 2012. but now the credit card giants are just paying out the final balance all at once and saving a little bit on interest. the average payout is $1700 to a retailer but since the amount a retailer receives is based on the number of transactions the biggest retailers are getting tens of millions of dollars. >> $1.1 billion could not have come at a better time than christmas. so to the extent that they were right on the edge in terms of having financing, this is additional money they wouldn't have had before. but i can tell you that i spoke with a medium-sized sporting goods retailer who told me they're going to be receiving close to $250,000. and, you know, that's real money especially at this time of year. >> now, no public company we contacted would tell us the exact amount it's receiving but sears says, quote, we see this
payment more like a long overdue tax refund than a christmas bonus as it represents a return of amounts merchants were overcharged. many retailers expect this case will not represent the final word on resolution of these issues. retailers are pushing congress for changes. there are a few bills being introduced. they're complaining they're now forced to accept credit cards with higher fees and are barred from giving discounts to consumers who pay cash. melissa, i think i may have misspoke. the lawsuit was based on retailers complaining they were being charged the same fees when a customer used a visa or mastercard debit card which is a cheaper transaction as opposed to a credit card. they don't have to do that anymore. if the consumer uses the debit card, they no longer have to pay a higher fee for it. >> got it. thank you very much for that report and the clarification. meantime windstream corporation one of the leading rural telecom carriers in the united states, a company making a switch to list on the nasdaq from the nyse. jeff gardner is the president and ceo of windstream.
great to see you. >> hi. >> first of all why the switch? >> well, we've been trading more and more on nasdaq over the last two years and as you know, nasdaq is all about technology and communications. that's our business. so after a very successful year at windstream it seemed logical to make the switch to nasdaq. >> you are, you have been created from the merger of altel's land line assets with another telecom company. you got $22.93 fixed lines. how has that been? i'm hearing more and more people are using cell phones as a replacement for land lines. >> absolutely that is happening. it's happening more in big cities. windstream is in rural markets across the country and the fact is 80% of the people in this country still have wire line phones and we have experienced much less line loss than the large carriers because of the markets that we're in today. over the last three years melissa we've been really focused on transforming our company from one that was
focused on wire line voice to broadband and business. so after some of the recent deals that we've announced over the last two weeks, over 50% of our business comes from broadband and business customers. >> so that helps you overcome the disadvantage of great distances in geography if you can get more customers in business i guess. >> that's absolutely true. the business market, mark, i think is going to grow nicely over the next four to five years. and we're very well positioned with high speed internet products in rural america that businesses need to improve efficiency and productivity. >> where are you in terms of technology? can you be -- can you be usurped? are you fiber optic? what are you? >> we have a mixture of copper and fiber in our networks. we offer businesses very high speeds. for our residential customers they can get up to 12 mg in our markets and for residential we serve big company, big universities like nebraska and
kentucky with very significant broadband projects. we can do it all. >> thanks so much for your time. we are still monitoring the geithner hearings and will bring you all the relevant headlines as mark had mentioned if you enjoy watching testimony and q & a watch it all on cnbc.com where it is streaming live. >> liesman is watching it right now. he's opened up the lounger and has the microwave popcorn. he's in his glory. >> that's right. i think he's outside having a smoke actually. >> oh, melissa. >> i'm sure he'll get right back to it. hey guys. at the top of the hour cnbc broke the news about citi repaying t.a.r.p. we'll discuss whether it made sense for them to do that. and treasury secretary timothy geithner, you just saw him on capitol hill talking about extending the t.a.r.p. program. we'll have a live report plus talk live with senator judd gregg who is adamantly against it. and with britain and now france calling for a tax on bank bonuses, should the u.s. follow
suit? we have a lot of viewers yesterday who thought they should. that's our call of the wild debate. lots ahead only on the call at the top of the hour. but first "squawk on the street" is back right after the break. because we believe in the strength of american businesses. ge capital understands what small businesses need to grow and create jobs. today, over 300,000 businesses rely on ge capital for the critical financing they need to help get our economy back on track. the american renewal is happening. right now.
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all right. tim geithner talking t.a.r.p. before the congressional oversight panel. we are monitoring the q&a. we will bring you any developments. the entire hearing is streaming live right now on cnbc.com if you really want to get down to that level of detail. >> meantime, europe's debt warnings and downgrades this week, a hiccup in the state of global recovery. should you be worried? global currency and public policy strategist as well as cnbc contributor joins us to answer that question. nice to see you. >> thanks, melissa. >> it seems that was all a bad dream, all of the debt downgrades and the markets over there in terms of dubai as well as greece, they're up. the cds spreads have come in on those areas of the world. are we ignoring this? >> i think we've gotten past the initial shock of the downgrade of greece, and clearly, spain getting moved to negative outlook shocked everybody as
well, but it underscores the problem that the world has going forward is that we've had, you know, a lot of government spending that's supported by debt that's not supported by tax receipts and guess what? that's the exact same problem that the uk and the united states has right now. >> in your view, is the u.s. dollar really the safest place? because that has been the flight to safety play during this whole thing. >> no. i mean, it was initially, but we obviously saw some play of buying dollars because of the improvement in the economic activity with the non-farm payroll from last week, but overall, the dollar -- it's a short-term pop to it. it's really more of a negative europe situation. if you noticed the euro has fallen and has it recovered with the major currencies and it's a sell europe play than it is a buy u.s. or sell u.s. situation. >> so is the uk the next one we need to worry about? >> definitely. i don't know if you saw today, but we had sarkozy.
>> that's why i ask. in abeditorial come out and say they should tax banker bonuses globally and why are they doing this? they need money and they'll cut dramatically. they'll need a lot of things in the uk and they have to generate something to cut their budget deficits which closing the circle on geithner appearing on t.a.r.p. today. it is whether or not the u.s. has the ability to spend $200 billion under less borrowing that they were going to do under t.a.r.p. or whether or not they're just going to use the receipts that they got in under t.a.r.p. so that's kind of an interesting development. i'm not sure they got the opportunity to do this, and there's a lot of people, 27 senators who are worried about deficits in the united states and want that money to go to deficit reduction. >> in your opinion, are these stories, dubai, spain, greece, maybe the uk, are these things to be concerned about, meaning
like a slower recovery and things like that or could there be -- could these things be trap doors? >> well, i think they're definitely fiscal drags and at some point, all these governments are doing what i mentioned at the beginning of this which is looking for revenue. how are they going to do it? well, they're going to increase taxes and that's a drag from a number of standpoints. for instance in the united states, we know the bush tax cuts will roll off in 2010, but we also know there may be a surcharge on the wealthy over 200,000 for the war in afghanistan. health care might be a tax as well and this is happening globally so it will reduce the top-end growth rates that you could get coming out of a very, very deep recession. >> andy bush, thank you very much for your time. >> you bet. >> okay. six stocks in 60 seconds coming right up. can't wait. >> we are almost 90 minutes into the trading session and we've got much more show in just two minutes. ♪
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let's start it off right now. aol officially being spun off from time warner and beginning its trading on the nyse this morning. three firms out there initiating coverage of aol today with, of course, three different ratings buy, neutral and sell. that stock trading lower by more than 2%. toll brother, the home builder upgraded from a hold to a sell at steeple nicholas and costco, the nation's number one warehouse club operator saying its quarterly rose sharply, that stock up by .5%. >> check it out. newmont mining along with most other gold stocks creating flat to lower this as spot gold loses its losing streak. right now gold up more than $6. oracle reiterated a buy at goldman sachs. the firm expecting an in-line second quarter and more positive guidance. we're going back to tim geithner right now. >> but surely you know a few things about how they're doing. >> i do know some things about
it and i have some views on that. the basic objective is to make sure that as we exit that we'll do as quickly as we can, we're leaving the capital positions of the institutions, stronger, want weaker. >> very good. >> in this regard, mr. secretary, bank of america is now in process. the -- it could be a little hard to follow the steps in which they're doing it. can you explain, are they repaying all of the t.a.r.p. money and have they raised equity capital to do that repayment in an amount that's equivalent to both the tip and the cpp? >> i can tell you the good thing is i have a check for $45 billion last night. >> i'm interested what the source of funds for that check is. >> as you said they went out and raised a mix. it was common, but i would be happy to respond. >> that's it. thanks for watching "squawk on the street." i'm mark haynes. >> i'm